The Asia Report is supported by Cathay Pacific
The China Banking Regulatory Commission has ordered banks to launch a new round of stress tests on property loans, according to Bloomberg.
In a statement on its website, the regulatory commission’s chairman Liu Mingkang said that lenders need to do more to manage risk.
In a statement Liu said:
“Banks should prevent property loan risks and readily apply the various policies…. The sustainable development of China’s macro-economy faces uncertainties.”
The move comes on concerns that a sudden drop in real-estate prices will cause a spike problems for the country’s banking sector.
In March, Shanghai announced that new home prices will be indexed against economic growth and changes in income. 40 other cities have already done so and Beijing has jumped on the wagon too.
Prices of new residential properties were lower in 12 large and medium-sized cities in March, according to data released by the National Bureau of Statistics. The number of cities which saw a rise in prices of newly built homes dropped from 56 cities in February, to 49 in March, according to the Wall Street Journal. Prices of newly built homes held steady in Beijing while prices rose 0.2% in Shanghai from the previous month.
Recently China has limited foreign ownership of properties and increased reserve requirement ratios in an effort to limit bank lending, however corporations are finding a way around this. Property prices are now expected to fall in April too.